Chian Teck Realty Pte Ltd. v. SDK Consortium [2023]

[2023] SGHC 210 [Singapore]

Note:

To support its work obligations, Chian Teck Realty Pte Ltd. (Subcontractor/Applicant), a Singapore reinforced concrete and precast specialist, applied for and caused Lonpac Insurance Bhd (Guarantor) to issue a SGD 1,123,152.55 performance bond in favour of SDK Consortium (Contractor/Beneficiary), the main contractor for a construction project (and consortium of three engineering companies). The bond value constituted 5% of the subcontract value and no practice rules were mentioned. The subcontract contained a clause stipulating that demands on the bond could not be restrained on the basis of unconscionability.¹ (para.3).

A few years into the project,² the relationship between the parties “deteriorated”. There were disputes regarding both performance of work as well as payment certifications. Subcontractor/Applicant later served a contract termination notice on Contractor/Beneficiary claiming it unilaterally reduced the scope of work and falsely accused Subcontractor/Applicant of performance delays. Contractor/Beneficiary’s first demand for payment was made 29 July 2022. Preceding the demand, Guarantor sent a letter to Contractor/Beneficiary in April 2022 informing that the bond would not be extended. While Contractor/Beneficiary claimed that it did not receive the April notice, it was undisputed that Contractor/Beneficiary received a second notice sent 19 July 2022.